After 23 quarters of uninterrupted growth, the U.S. economy contracted for the first time since 2014 in the first three months of 2020. According to the second estimate released by the U.S. Bureau of Economic Analysis on Thursday, real GDP declined by 5.0 percent in Q1 2020, down from a first, preliminary estimate of 4.8 percent released in late April. This marks the worst contraction since Q4 2008, when U.S. GDP declined by 8.4 percent at the height of the financial crisis.
Coming amid the COVID-19 crisis that has hit the U.S. economy with full force in late March, the downturn was widely expected and is feared to be a mere taste of worse things to come. Considering that large parts of the country have been on lockdown through all of April and that more than 40 million Americans filed for unemployment benefits during the pandemic, it’s all but certain that things will get worse before they get better.
“The decline in first quarter GDP reflected the response to the spread of COVID-19, as governments issued “stay-at-home” orders in March,” the BEA wrote in its official release. “This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.”
While not officially the end of the longest expansion in U.S. history – a recession is widely defined as two consecutive quarters of negative GDP growth and has to be officially declared by the National Bureau of Economic Research’s Business Cycle Dating Committee – experts consider a recession inevitable at this point, the question now being how long and how deep it will be.